Guddi (employee) (774 Points)
29 March 2014We have received the following bill from a firm. Whether we have to pay service tax under reverse charge(works contracts). If yes on what amount.
Electrical items -- 50000
installation chrges -- 2000
total -- 52000
vat on 50000 @ 14.5% - 7250
total - 59250
Harendra Kumar
(Tax Advisor )
(1326 Points)
Replied 29 March 2014
Mam,
You are eligible for pay service tax on Rs. 52000.00 only.
Guddi
(employee)
(774 Points)
Replied 29 March 2014
Thank you. But can you elaborate further. Why service tax is applicable on 50000 i.e, purchase items....Please clarify from the view point of service recipient.
Thanks in advance
Arun Kumar Singh
(GST Advocate)
(15220 Points)
Replied 29 March 2014
If sale tax/vat has been paid then no need to pay service tax. Service tax will be payable on only insallation charges.
Guddi
(employee)
(774 Points)
Replied 29 March 2014
Thank you sir. so you mean to say, as service recepient we need to pay @ 4.326% on 2000/- i.e., Rs. 729 directly to the government. Also tell can we take input credit of the same. we are company providing ad services. Please clarify...
Guddi
(employee)
(774 Points)
Replied 29 March 2014
What if in the above bill, vat/ sales tax is not charged, do we need to pay service tax on entire bill of Rs. 52000 @ 4.326% i.e., 2,250. in the earlier query service tax on 2000/- comes to 87/-
Thanks in advance
Vishal Gupta
(CA)
(59 Points)
Replied 29 March 2014
If in the invoice, material & labour charges are shown seperately then ST to be charged on labour(installation charges in this case) only. Reverse charge is appplicable only when service provider is individual/firm/HUF/AOP & service receiver is body corporate/company.
Vishal Gupta
(CA)
(59 Points)
Replied 29 March 2014
| Originally posted by : Guddi | ||
 |
Thank you sir. so you mean to say, as service recepient we need to pay @ 4.326% on 2000/- i.e., Rs. 729 directly to the government. Also tell can we take input credit of the same. we are company providing ad services. Please clarify... |
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If the service receiver is a company, then 50% of the ST liability (2000*12.36%*50%=Rs. 124) to be paid by the company & balance 50% by the firm(service provider).
Vishal Gupta
(CA)
(59 Points)
Replied 29 March 2014
| Originally posted by : Guddi | ||
|
What if in the above bill, vat/ sales tax is not charged, do we need to pay service tax on entire bill of Rs. 52000 @ 4.326% i.e., 2,250. in the earlier query service tax on 2000/- comes to 87/- Thanks in advance |
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Irrespective of the fact that vat/sales tax has been charged or not, if invoice amount has been bifurcated into material & service seperately then ST to be charged on service charge only.
Akshay Garg
(Indirect tax trainee)
(457 Points)
Replied 29 March 2014
Service tax has to be paid under reverse charge. The rate of service tax shall be 12.36*2000*50% as per partial reverse charge notification.
Yes you can avail the input tax credit as per CCR rules 2004.
Guddi
(employee)
(774 Points)
Replied 30 March 2014
But service tax is payable only on 70% value of service portion(i.e., installation of electrical fittings of immovable property. In that case, service tax payable as a service recepient is 2000*0.7*0.1236*50% = 87/-
What if invoice does not bifurcate material and service portion. Ex: Electrical items with installation = Rs. 52000. Is service tax payable on entire 52000 on 70% value. ie., 52000*0.7*0.1236*50% = 2250/-
CA Saroj Kumar
(Keen to learn something new every moments)
(2588 Points)
Replied 31 March 2014
sudarshan
(CA)
(745 Points)
Replied 31 March 2014
reverse charge is applicable for Works contract. In this case, it is pure labour. so ST is 12.36% and to be discharged by SP only
Akshay Garg
(Indirect tax trainee)
(457 Points)
Replied 31 March 2014
would demarcation of differnt values of service and goods make a change in the nature of the contract
Vishal Gupta
(CA)
(59 Points)
Replied 01 April 2014
| Originally posted by : Akshay Garg | ||
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would demarcation of differnt values of service and goods make a change in the nature of the contract | |
As per Clause 54 of Section 65B of the Finance Act, Works Contract means a contract wherein transfer of property in goods involved (in the execution of such contract) is leviable to tax as sale of goods & such contract is for the purpose of carrying out construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, alteration of any movable or immovable property.
So, demarcation of different values of goods & service wont change the nature of contract.
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